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After 8 years in office, Pascal Lamy, the long-standing, cool-headed leader of the World Trade Organization will step down. Lamy (France, and former EC Commissioner for Trade) was the fifth Director-General of the WTO. Past leaders included Supachai Panitchpakdi (2002-2005, Thailand), Mike Moore (1999-2002, New Zealand), Renato Ruggiero (1995-1999, Italy) and Peter Sutherland (1993-1995, Ireland, also the last leader of the GATT). (WTO)

Lamy has presided over the WTO during some difficult times. Most notably, he has repeatedly tried–and failed–to revive the Doha round of trade talks. This has not been his fault, the D-G has limited power to impact members’ behaviors. And one could say that he has succeeded in fending off the complete death of the negotiations. However, one can wonder whether a fresh face might help revive talks.

Who is running for office?

According to Reuters, we only have two names at the moment (Reuters). Formal nominations will be made in December

The African Candidate
It is common for regional blocks to put forward their own candidates and the African Union may have the clearers mechanisms for doing this. Several potential African candidates have been mentioned. Nigeria’s Finance Minister, Ngozi Okonjo-Iweala, who also was an important candidate for the World Bank’s top job earlier this year, has reportedly expressed no interest in running for the WTO position (PeaceFMOnline). Nigeria’s current trade minister, Olusegun Aganga, has also been mentioned. Another possibility that has been mentioned is South Africa Trade Minister Rob Davies (Reuters). But apparently the AU has decided it will be none of the above. There are a number of reports stating that the African Union has decided that Ghana’s former trade minister, Alan Kyremanten, should hold the post (Ghana Joy Online; AfricaNews.com). Kyerematen currently is the trade advisor at the UN Economic Commission for Africa and head of the African Trade Policy Centre. (thisafrica.com). As Reuters reports, this was a contentious decision. However, if he can get all of Africa’s WTO members to back him, then that would be (a) the first time all of them supported the same candidate and (b) a significant portion of the WTO’s membership, which could go a long way towards getting him elected to the job.

New Zealand Again?Another likely candidate is New Zealand’s trade minister Tim Groser. However, it has barely been a decade since someone from New Zealand held the post, making his chances unlikely (The New Zealand Herald).

Other possibilitiesReuters mentions a number of possible candidate from Mexico and Costa Rica, with some broader speculation about Brazil’s Ambassador to the WTO, Roberto Azevedo, as a possible Latin American choice.

Bottom LineIt is still way too early to tell what will happen in this competition for the WTO’s top job. But it is clear that the game is afoot.

The WTO and Sustainable DevelopmentLesotho Ambassador Mothae Maruping is the current chair of the WTO’s Committee on Trade and Development. ICTSD has a nice report of their recent meeting and its focus on sustainable development. One thought is how to integrate the WTO’s Aid for Trade program with the goal of developing a green economy. Nevertheless, it is clear that some developing countries may also see the WTO as a shield from any radical green agenda that might try to restrict their ability to trade. The delegate from Benin:

Benin said that the WTO should facilitate the elimination of distorting trade practices related to environment that are “incompatible with sustainable development”. “It is important to avoid creating new trade barriers, imposing new conditions to aid, and deepening the technological gap between developed countries and developing countries

The WTO and Regional Integration within AfricaPeter Draper has a nice discussion of the relevance of WTO rules for regional integration efforts in Africa (ICTSD). He anchors his discussion with consideration of the proposed tripartite preferential trade agreement (T-PTA) between SADC, COMESA, and the EAC (basically uniting southern and eastern Africa). He points to a WTO report which singles some of the issues in maintaining coherence between WTO rules and the rules of these new trade arrangements. His overall conclusion seems to be that the negotiating parties strive to maintain coherence with WTO rules and perhaps even allow the WTO’s help with a “mulilateralizing regionalism” component.

Doha RoundTrying to Move Forward
The BRICS would like to remind us that Doha is not yet dead (MN). Both at their own summit last month and at a G-20 meeting in Mexico, they made this point. The WTO’s Director-General Pascal Lamy continues to try to breathe new life into the round. His most recent innovation is the creation of a 12-person panel of stakeholders which include corporate leaders, former heads of state, and leaders of various international institutions. Former President of Botswana, Festus Mogae is the sole African representative to the panel.

Positive DevelopmentsAgricultureOne of the major sticking points has been agriculture, especially for many African countries. The Doha Round began with a major campaign criticizing European and American farm subsidies and support for undermining agriculture in developing countries. Many of these subsidies continue, but there are some signs of change in Europe, at least. ICTSD reported this week that total EU farm support has dropped a bit and overall trade-distorting support has dropped even further:

Overall trade-distorting support – a category including amber, blue, and de minimis support – reportedly fell to €18.3 billion, a figure that is below the €22 billion cap that would be established under the draft Doha agriculture accord. (ICTSD)

The BRICS have been very active in recent weeks. The significance of an alliance of Brazil, India, and China is not lost on many. But occasionally some have wondered whether Russia deserves to be in the group and South Africa’s entry last year raised a few eyebrows (and still does).

The Summit
Their summit in New Delhi, held on March 29, included a number of activities that suggest the group is strengthening its institutional bonds. Here is a brief description of some of their outputs:

The Delhi Declaration, capturing the essence of discussion as well as putting forth common position of BRICS countries on various economic and political issues of global and regional importance was issued at the end of the Summit. The Declaration included Delhi Action Plan which highlights the activities to be undertaken under India’s chairmanship of BRICS to further cooperation. Two agreements namely- “Master Agreement on Extending Credit Facility in Local Currencies” and “BRICS Multilateral Letter of Credit Confirmation Facility Agreement”- were signed by the Development Banks from BRICS countries. The Leaders also released “The BRICS Report” focusing on synergies and complementarities between the BRICS economies and highlighting their role as growth drivers of the world economy. An updated edition of BRICS Statistical Publication was also issued at the occasion.

They make a number of bids for their relevance to any future decision-making about the global economy. There is, for instance, this statement in their declaration:

BRICS is a platform for dialogue and cooperation amongst countries that represent 43% of the world’s population, for the promotion of peace, security and development in a multi-polar, inter-dependent and increasingly complex, globalizing world. Coming, as we do, from Asia, Africa, Europe and Latin America, the transcontinental dimension of our interaction adds to its value and significance.

In a recent op-ed, Jeffrey Sachs worries about whether the multi-polar environment signaled by the rise of the BRICS means a loss of leadership at a time when the world needs a clear leader (Business Insider). Jeremiah Kure at Mail & Guardian’s Thought Leader voices a thought commonly heard in some corners of the developing world: maybe it is about time the US and the North Atlantic-led world order change.

The Global EconomyThe clearest place where the BRICS are trying to have an impact involves the global economy. This year was only their fourth summit, but their action items are getting clearer. Collectively, they have a lot of potential to collaborate on financial and economic matters (Ghosh). One of their more tangible plans is the launching of a development bank in the first quarter of next year and apparently located in South Africa (Reuters). While this definitely provides a challenge for the other global IFIs, the BRICS are not yet giving up on the IMF and World Bank. They are just repeating their previous bid for greater voice in those global institutions. Most recently, they told the IMF they would provide more cash if they could expand their decision-making role (Reuters). Of course, there is some irony that it is euro-zone countries that are in need of this cash.

The BRICS also have not given up on the WTO’s Doha Round of trade negotiations.

we will explore outcomes in specific areas where progress is possible while preserving the centrality of development and within the overall framework of the single undertaking (ICTSD)

Beyond Economics and FinanceSecurity
The BRICS agenda is not solely economic. Their own agreement that they are not bound by the West’s decisions to sanction Iran (which they definitely are not, legally), suggests they are interested in flexing some political muscle as well. (And it is useful to note that the only BRICS country NOT to ever have had nuclear weapons is Brazil, although it did have a bit of a program for a brief period of time.)

Climate Change
Unfortunately, the BRICS also seem unlikely to provide leadership on climate change. Their priorities are clearly on economic development. This is what they state in their declaration:

We affirm that the concept of a ‘green economy’, still to be defined at Rio+20, must be understood in the larger framework of sustainable development and poverty eradication and is a means to achieve these fundamental and overriding priorities, not an end in itself. National authorities must be given the flexibility and policy space to make their own choices out of a broad menu of options and define their paths towards sustainable development based on the country’s stage of development, national strategies, circumstances and priorities. We resist the introduction of trade and investment barriers in any form on the grounds of developing green economy.

You know the WTO is in trouble when…… The Financial Times says negotiations are dead. In 2008 they argued that leaders should admit the talks are over. They haven’t really been optimistic since.
… We start to argue that an assassination will save it. Jagdish Bhagwati, one of the great spokesmen for concluding the Doha negotiations, starts grasping at straws. For instance,his letter to the Financial Times on May 6th, argues that Osama bin Laden’s assassination provides just the opportunity that is needed to restart the round.
… We say we should kill the talks in order to save them. That is the logic that Bhagwati claims they are using when his (and Sutherland’s) High-level Expert Group on Trade advises that the Doha Round be abandoned if there is no agreement this year. “Our idea,” he states, “was that just as the prospect of an imminent hanging concentrates the mind, the deadline and prospective death of the Doha Round would galvanize the world’s statesmen behind completing the last mile of the marathon.”

Should we narrow the agenda and what are the obstacles to doing this?
The Financial Times has editorialized on the progress of the talks a number of times.This past April, they suggested the WTO should move away from its current all-or-nothing approach to negotiations. It is important, they argued, that the WTO show it is a “rule making system [that] can adapt and renew itself.”

That concern and approach has driven WTO Director-General Pascal Lamy’s move to conclude a limited version of a Doha deal this year. However, “Doha Lite” seems to be hitting roadblocks as well. (“Doha lite runs into rough weather”, June 10). The US is at the center of this. Alan Beattie reports (“WTO scrambles to savage Doha talks” FT, June 12.) that the US is a major stumbling block to progress on the Doha Round. As I write in my book manuscript, African countries have been able to wield significant influence in the round by reasonably demanding that the US change its support for one commodity: cotton. Indeed, cotton–and other agricultural issues–remains a major issue.

Why should we save the Doha Round?
While I was on vacation, Sutherland and Bhagwati’s Trade Experts Group published their important report, “World Trade and the Doha Round.” You can download it here. In it they argue that the Doha Round should definitely be saved. Some of the highlights:

There is a moral argument, as well as an economic argument, that needs to be considered: “Indeed before the twentieth century the conventional case for trade was a moral one: that it promoted economic integration and therefore peace, and that the efficient allocation of resources that it encourages pushes down prices for clothes, food and consumer goods. The argument that open trade damages the interest of workers in developed countries too often misses completely the fact that it has rendered the goods they buy cheaper, more diverse and in many cases more sophisticated than at any previous point in human history.”

And then there are the familiar economic reasons for open trade: competition promotes efficient specialization, open trade is linked to economic growth, etc.

The WTO is under threat: PTAs and other regional agreements, the lack of political will on the part of country leaders today, and the continuing struggle to accommodate the wishes of emerging powers are all part of this.

Other ad hoc solutions for governing global commerce are not better. I agree with Bhagwati, for the most part, when he says that Preferential Trade Agreements are starting to take over the rule-making agenda (also one of the conclusions made in the report above).

We also don’t want to have 1930s-style destructive economic competition. As Pascal Lamy and others have warned, the recent financial crisis already has increased protectionism around the world but that sort of policy can lead to mistrust and threaten not just the global economy but also global security. As a recent report from Roubini Global Economics (gated) suggests, the WTO has played an important role in stemming such problems.

Finally, if the “we” in my question above is the United States, then there might be an even more poignant reason to act and try to conclude the Doha Round now. We may not get the agreement we most desire (we definitely will not, nor will anyone else) but it is even less likely that we will get a deal we like in the future. The American economy may recover from its recent crisis and begin to grow again, but all signs point to our gradual relative economic decline. This could be our last great shot at putting our mark on global economic governance and ensuring that an institution we created survives the inevitable change in the distribution of power.

On that note, I keep thinking I should write a post (or something) on this theme: The United States should act like a great power, but think like a middle power. That is, we should use our power resources which still allow us to dominate on most global issues, but we should be interpreting our interests more and more in terms of how we will like the international system to look when we are no longer so dominant.

The WTO is more than Doha
However, I believe it is too easy for the casual observer to interpret the faltering Doha talks as signs of a weak institution. The WTO still clearly matters a great deal in global economic relations. Countries still expend considerable resources to participate in the daily meetings in Geneva and the dispute resolution system is still one of the most relevant (if not the most relevant) quasi-judicial process the international system has (although there is the occasional concern about its future, such as in this post by Hufbauer and concerns expressed in Elsig and Pollack’s recent piece).

Ghana has received a lot of attention over the past few years for the offshore oil finds. As the BBC reported earlier this year, Ghana’s economic growth rate is expected to double due to this find. Some of the most recent news on this:

The debate as to whether Ghana will “escape” the oil curse rages on.

Ghana’s Business Guide reports that “prominent indigenes” of the Niger Delta are warning Ghanaians that the troubles in Nigeria could be reproduced in Ghana. Specifically, they cite the concern that oil companies will use Ghanaians against each other.

Meanwhile, Ghana Business News cites Standard Chartered Analyst Raziah Khan, who claims that Ghana is doing too many things right to experience an oil curse. This includes hedging their entire share of production from the Jubilee oil field, passing a law that saves oil income for future generations (a “Heritage Fund”). However, as they note, there is still concern that more needs to be done to protect Ghana from possible environmental damage.

At the Pulitzer Center on Crisis Reporting,Christiane Badgley has a series of reports on oil’s actual and potential impacts. One of the more significant themes in her work is the problem that oil production is posing for fishermen.

It is obviously way too early to tell if Ghana will escape the oil curse. One major question is whether Ghana’s democracy has had enough time to consolidate itself and avoid some of the high levels of corruption that other African nations have experienced in connection with oil. Indeed, oil need not lead to bad politics (the US, Norway and many other nations have avoided such problems for the most part). As Thad Dunning notes in his excellent book, Crude Democracy, oil finds can also promote democracy. If other sectors of the economy are still important to elites, and if the country is overall poor and unequal, then an oil boom may actually make democracy more palatable to elites as they now have another source of revenue for redistribution. (OK, this is an oversimplification of his argument…. definitely pick up his book if this idea interests you!).
I like the optimism in Charles Kenny’s Foreign Policy piece,“What Resource Curse?”. A couple of nice quotes:

“The curse is the type of counterintuitive idea that makes for a great newspaper op-ed. Nonetheless, the curse is also the kind of counterintuitive idea where intuition may have been right to begin with.”

“Blaming oil wealth for poverty, though, is like blaming treasure for the existence of pirates.”

My colleague here at Wesleyan, Masami Imai, recently pointed me to a new China White Paper (news video, full text). This is an important document for a number of reasons. First, the actual amount of Chinese foreign aid has been difficult to discern for researchers. This is due to a number of reasons, including: variations in definitions for what should count as foreign aid (in the West, we use a standard definition that was developed by the OECD’s Development Assistance Committee), lack of centralized aid provision and reporting in China (they have no equivalent to USAID, for instance), and uncertainty about whether some aid is provided without any report. The World Bank once reported that China aid to Africa between 1960 and 2006 was $44 billion (see Brautigam’s response). Given new data this was clearly an overestimate. However, one of the more amusing misrepresentations of China’s aid to Africa is a Congressional Resource Service report.As Deborah Brautigam notes, that report was WAY off the mark. It suggested that China’s aid to Africa in 2007 was $25 billion. Brautigam estimated that it really was 5% of that. According to their new White Paper it must be low indeed. The White Paper states that TOTAL foreign aid to the whole world since 1950 is just under $40 billion.

What is clear from the new White Paper, however, is that Africa is the major recipient of Chinese foreign aid:

I definitely recommend looking for Brautigam’s analysis of the White Paper. I’m sure it will come soon.

The World Trade Organization (WTO) has been central to my research agenda for a long time now. I am currently in the process of completing a book manuscript that examines African participation and influence in global economic governance. I begin with the assumption that they have to work through coalitions, and then proceed to consider how different institutional environments impact their ability to form and maintain such coalitions. I find that those institutional environments can vary in several important ways, including how specific international and regional institutions overlap. For instance, when institutional environments require rule-making to take place across multiple institutions (such as the case of trade-related food safety measures, where rules are made at the WTO, Codex-Alimentarius Commission and elsewhere), then the obstacles to forming and maintaining coalitions increase. And, indeed, we see African states have more difficulties in impacting rule-making in such environments.

Given the centrality of the WTO to most areas of economic governance, I pay close attention to on-going developments in that organization. This past summer, several stories grabbed my attention: the status of the on-going Doha Round of negotiations, Lamy’s attempts to invigorate that round with a “cocktail approach”, and the on-going struggle to reform trade-distorting US domestic cotton support. This post touches on those themes and several others.

Doha Round Status

The Doha Round is not dead, though reports of its demise recur on a regular basis. One needs to remember that multilateral trade negotiating rounds have always taken a long time to conclude (last time, the Uruguay Round began in 1986 and only officially concluded in 1994). Additionally, there are now many more member states and economic power is more diffuse than it was during past rounds. So it should be no surprise that there have been a number of obstacles to concluding the current round of negotiations. Indeed, towards the beginning of the summer, attempts to conclude the Doha Round seemed to take another blow, as the G8 abandoned a pledge to conclude trade negotiations this year. However, some also cautiously report on continued progress, including sources in India (for instance, The Economic Times).

Director-General Pascal Lamy’s recent report to the WTO General Council tries to frame the WTO’s Doha Round and “Aid for Trade” as important contributions to the UN’s Millennium Development Goals. However, his main strategy for keeping Doha alive seems to be linked to beverages…

“Shaken, Not Stirred.” Cocktail Approaches to Negotiations

My attention has been captured lately by Director-General Pascal Lamy’s new strategy in multilateral negotiations: the cocktail approach. He seems very excited about it. There are three core ingredients to this cocktail: (1) Chair-led consultations, (2) informal bilateral discussions, and (3) consultations with Lamy. He speaks of these dynamics as occurring both horizontally and vertically. The idea, apparently, is that these ingredients are already here, and that what is needed is for us to shake them vigorously (perhaps Lamy has an affinity for Bond, since he says that simply stirring this favorite cocktail of his is not enough).

This is not the first time a cocktail approach has been used to encourage progress in WTO negotiations. The idea goes back at least to Tim Josling and Allan Rae who describe its application to agriculture negotiations back in 1999. The idea, they suggested,was to take current tariff levels and treat each level with a different modality. For instance, states could eliminate tariffs where current levels are below 5%, but for tarriffs that are extremely high (say, 300%) states may agree to simply allow space for bargaining. In their analysis applying the “cocktail” approach did have some benefit for African states. Their approach was embraced by a number of negotiators in the early phases of the Doha Round and continues to be mentioned today.

Looking at the broader negotiation literature, cocktails have had other metaphorical use. Cocktail can refer to a hybrid approach in negotiating tactics by individual actors intent on pushing or securing an advantage (see Matos et al. 1998).

Cotton

I am also asked, when I speak about the role African states play on the cotton issue, whether they are merely following another state’s lead (Brazil). I always say that this might be the case with dispute settlement, where African states have only acted as third-party supporters of Brazil’s activities. However, African states have clearly been leading players in using cotton as an issue to press for greater advantage in negotiations on agriculture in the Doha Round. If Brazil’s strategy has been to use judicial processes, African states have tried to push for a legislated solution.

This summer it became even clearer that Brazil stands alone on the cotton issue. It seems to have forgotten the rhetoric of how the “South”, including Africa, is hurt by wrong-headed agricultural policies in the industrialized “North”. Indeed, Brazil’s cotton farmers now apparently are being paid US subsidies. In return for not applying WTO-authorised trade sanctions, Brazil has decided to accept payment from the US to its farmers. As the Financial Times notes, this just makes them new stakeholders in the US Farm Bill. This is too bad, as Brazilian sanctions, while generating a number of negative externalities for Brazilian consumers and American exporters, could also have generated positive externalities for Africa’s more needy cotton farmers.

The WTO is not just the Doha Round

While the apparent lack of progress in the Doha Round might seem to signal a lack of commitment by the international community to this organization, it is far from being the case that the WTO’s relevance relies only on that round.

For one thing, the WTO administers a number of international agreements. One of those, which member states do not have to sign, is the Government Procurement Agreement. This agreement tries to encourage transparency and the principle of non-discrimination in government procurement. Signing the agreement ensures formal access to government procurement contracts in other signatory countries. The United States is one of 40 such countries. So, as the Financial Times reported, it is not surprising that China is actively trying to negotiate access to the agreement. Accession requires the consent of the current parties (Article XXIV, 2).

My colleague, Peter Rutland, has a nice piece in the Financial Times about Russia’s bid to enter the WTO. It is, as he notes, “embarrassing” that Russia is the only major economy not included in the 153-member organization. He notes many of the important obstacles to that bid: some member countries (Georgia) don’t like Russia very much these days, Russian leaders don’t always seem particularly committed to the process, and the United States has raised a number of objections along the way. Rutland’s piece is partly a reminder that some of these and other challenges remain, even as US President Obama announced last month a joint commitment with Russia to see the bid through. I think that much of this analysis is right, but I would add one more obstacle to Russia’s bid: the on-going Doha Round. If Russia were to join, it would also have a major voice in the on-going negotiations (especially if they continue to drag out). Russia is a big enough player that it could upset many of the deals and alliances that have been made over the last decade. That could be both good and bad for progress in the negotiations. But is is unlikely that it would be neutral.

The G20 has a lot of issues on its plate and at the top of the list, obviously, is the on-going financial crisis. I have already commented on the problems African countries face in getting their voices heard. On that point, Africa may have an ally in Pope Benedict who, recently returned from his Africa travels, noted the problems of adequate representation from those “who suffer most from the harmful effects of a crisis for which they do not bear responsibility”. The Pope suggests states rely on the UN and associated institutions. Jeffrey Sachs has also jumped on this bandwagon, noting that while South Africa will be present “South Africa by itself represents South Africa”. And we all know that South Africa is not a “typical” African country (if there is such a thing).

On the point of South Africa, it might be useful to remember that President Motlanthe himself may not be in the strongest position to represent his country’s interests, given all the recent upheaval within the South African political system and the temporary nature of his position as President.

NGOs, such as Oxfam, are trying to use their influence to encourage the G20 to commit to aiding Africa as it deals with the crisis. Duncan Green, head of research for Oxfam, highlights their main requests of the G20 in a recent blog post. He comments as well on a leaked copy of a G20 communique, obtained by the Financial Times. Indeed, the way these conferences usually go, it is likely that at least some of the major decisions have already been negotiated ahead of time. Which leaves one to wonder whether adding an African voice at this point could make a difference.

The World Bank has published figures (reported on BBC News) that somewhat echo the gloomy global economic forecasts of the IMF and OECD.

The forecast predicts that developing countries will need $1.3tn in external financing to repay debt and cover balance of payments problems, and may fall short.

Apparently, protestors see the G20 meeting as an opportunity to demonstrate their unhappiness with a wide range of global issues, from the financial crisis to the “siege of Gaza” to the wars in Afghanistan and Iraq. While I understand their frustrations with global leadership on these matters, I don’t think it helps their cause to get into fights with the British police. Apparently, these frustrations are being vented worldwide.

China is trying to exhibit its leadership potential as well. This has included lobbying for a new “super-sovereign reserve currency to replace the U.S. dollar”, the provision of advice to rich countries, and lobbying to stop states from moving towards trade and investment protectionism.

The Chinese are not the only ones worried about protectionism. Pascal Lamy, head of the WTO, has warned that moves towards protectionism may further impact the already troubled Doha round of trade negotiations.

“IMF finally calls it – the world economy will shrink in 2009, and developing countries are hit harder than we thought

Every revision of global growth predictions has been heading towards zero, and now the IMF, in its report to the G20 finance ministers’ meeting last weekend, has taken the next step. It predicts the world economy will shrink in 2009, (by minus 0.5-1%) for the first time in 60 years. It’s pretty safe to assume that this won’t be the last downward move.

Take a look at the chart. Developing country growth is the only positive bar left (though well below the rate of population growth), but it was the largest downward revision in the forecast, marking the increasingly rapid contagion via finance, trade, remittances, commodity prices etc. In terms of the difference between growth in 08 and 09 only Japan takes a bigger hit than the developing world.”